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1、EquilibriumandEfficiency14LearningObjectivesAfterreadingthischapter,studentsshouldbeableto:}Identifythefactorsthatmakeamarketperfectlycompetitive.}Determineshort-andlong-runmarketdemandandsupply.}Analyzechangesinmarketequilibriumduetochangesinmarketco
2、ndi-tionsintheshortandlongrun.}Demonstratehowperfectlycompetitivemarketscanbeconsidered“efficient”forsociety.}Measureaggregatesurplus,consumersurplus,andproducersurplususingmarketsupplyanddemandcurves.nthenightofNovember9,1989,theBerlinWallcamedown.Its
3、OfallmarkedtheculminationofarevolutioninCentralEurope,onethatgavepoliticalandeconomicfreedomtomil-lionswhohadlivedforyearsunderSoviet-controlledcom-munistregimes.Soonafter,theSovietUnionwoulditselfbreakapart,unabletosustainhighmilitaryspendingandacol
4、lapsingeconomy.ThecollapseofcommunismmarkedaturningpointfortheeconomiesoftheformerSoviet-blocnations.Intheyearsthatfollowed,manywouldtransitionfromstate-controlledtofree-marketeconomies.State-ownedfirmswouldbepriva-tized,andnewbusinesseswouldbeallowed
5、toformwithouthindrance.Theeconomiesofthosenationsthataggressivelyembracedfreemarketsandprivatizationsoonbegantogrowrapidly.InPoland,forexample,theshareofgrossdomesticproductproducedbyprivatefirmsincreasedfrom19percentThefalloftheBerlinWall(above).Soon
6、after(below).495ber00279_c14_493-538.indd495CONFIRMINGPAGES10/18/073:13:53PM496PartIIIMarketsin1988to65percentin1997.Grossdomesticproductpercapitaroseover150percentinthetenyearsfrom1990to2000.Economistsputalotoffaithinmarkets.Inthischapter,wellseewhy
7、.AswenotedinSection1.1,therearemanywaysforasocietytodeterminewhatgoodsareproduced,howtheyareproduced,andwhoconsumesthem.IntheformerSoviet-bloccountries,thosedecisionsweremadelargelybygovernmentedict.Inamarketeconomy,mostofthosedecisionsaremadeinstead
8、byindividualswhofacemarketprices.Whenmarketsareperfectlycompetitive,thisprocess,whichAdamSmithcalledtheinvisiblehandofthemarket,producesanoutcomethatmaximizessocietysnetbenefitfromtheproductionandconsumptionofgoods.Thatisnottosaythatmarketsalwaysperfo
